Stocks struggle ahead of Fed

After rallying last week on bets of a rate cut, Wall Street takes a breather Tuesday amid weak consumer confidence reading, Merrill CEO resignation; oil prices drop.

By Alexandra Twin, CNNMoney.com senior writer

October 30 2007: 6:38 PM EDT

NEW YORK (CNNMoney.com) -- The Dow slipped and the broader market ended mixed Tuesday, after a choppy session in which investors mulled weaker economic news and lower oil prices ahead of an expected interest rate cut from the Federal Reserve Wednesday.

The Dow Jones industrial average (Charts) lost 0.6 percent. The S&P 500 (Charts) index lost around 0.7 percent.

The Nasdaq composite (Charts) ended little changed, after having been on both sides of the unchanged line through the session. The tech-heavy index ended the previous session at a 2007 high and its highest close in nearly seven years.

Ahead of the Fed meeting, investors will take a look at the third-quarter gross domestic product growth report, the construction spending report and the Chicago PMI, a regional read on manufacturing.

Earnings are due Thursday morning from Alcatel-Lucent (Charts), Kraft Foods (Charts), Sunoco (Charts, Fortune 500) and others.

Shake-ups on the Street

A weak consumer confidence report, disappointment about Procter & Gamble's forecast and the resignation of Merrill Lynch's CEO were among the factors dragging on the session. Strength in technology and a drop in oil prices were among the positives.

Stocks rose last week and Monday as Fed hopes overshadowed record oil prices as high as $93 a barrel, and a weak dollar. After such a run, stocks saw a broader retreat Tuesday morning. But the Nasdaq managed to recover by the close, thanks to select tech gainers, including Microsoft (Charts, Fortune 500), Apple (Charts, Fortune 500) and Google (Charts, Fortune 500).

"The market is waiting for the next shot in the arm and the Fed is likely to provide it tomorrow," said Georges Yared, chief investment strategist at Yared Investment Research.

Federal Reserve officials meeting Tuesday and Wednesday are expected to cut the fed funds rate, a key short-term interest rate, by a quarter-percentage point to 4.50 percent.

The Fed cut rates last month by a half-percentage point in an attempt to both loosen up the credit market and stop the housing market collapse from sending the broader economy into a recession.

It was the first rate cut in four years and at the time the bankers indicated that inflation fears had receded.

However, with oil prices near all-time records and gold prices near 26-year highs, concerns remain about pricing pressure and the strength of the consumer. Investors will be looking for the statement accompanying Wednesday's decision to address these issues, as well as other recent signs that economic growth continues to slow.

That run up in oil prices and spate of weaker economic news was reflected in the Conference Board's October consumer confidence index, released Tuesday morning. Confidence fell to its lowest level in two years, versus forecasts for it to hold steady.

Another economic report, the S&P/Case-Shiller housing index showed U.S. home prices fell in August for the eighth consecutive month.

Wall Street banks on another rate cut

In corporate news, Merrill Lynch (Charts, Fortune 500) said Chairman and CEO Stanley O'Neal is retiring from the firm, as expected, one week after the brokerage said it lost $8 billion in the third quarter due to bad mortgage bets.

Merrill shares fell 2.8 percent and dragged on other financial stocks.

Procter & Gamble (Charts, Fortune 500) reported higher quarterly earnings that edged expectations, but issued a current-quarter outlook that disappointed some investors, sending the stock down 3.7 percent. (Full story).

Fellow Dow stock Boeing (Charts, Fortune 500) continued to rise on late Monday news that it is boosting its share buyback plan by $7 billion and that it is announcing a quarterly dividend of 35 cents per share.

ON Semiconductor (Charts) shares slumped 16 percent in unusually active Nasdaq trade after the company reported lower third-quarter earnings that missed estimates and gave a fourth-quarter revenue forecast that is below analysts' estimates.

Around 63 percent of the S&P 500 September quarter earnings have been reported, with growth on track to have fallen 1.3 percent from a year ago, according to the latest Thomson Financial figures. That makes the quarter the weakest in at least five years.

Market breadth Tuesday was negative. On the New York Stock Exchange, losers beat winners 5 to 3 on volume of 1.22 billion shares. On the Nasdaq, decliners topped advancers by 3 to 2 on volume of 2.18 billion shares.

Why a Fed cut won't save Christmas

U.S. light crude oil for December delivery fell $3.15 to settle at $90.38 a barrel on the New York Mercantile Exchange after settling at a record $93.53 a barrel Monday. Crude reached a record $93.80 during the session Monday.

COMEX gold for December delivery fell $4.80 to settle at $787.80 an ounce.

A variety of stocks in the oil and metals sectors fell along with the price of the raw commodities, including Exxon Mobil (Charts, Fortune 500) and Alcoa (Charts, Fortune 500).

Treasury prices were little changed, with the yield on the benchmark 10-year note at 4.38 percent, little changed from late Monday. Bond prices and yields move in opposite directions.

In currency trading, the dollar slipped a bit versus the euro after falling to another all-time low against the European currency Monday. The dollar rose against the yen.

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Microsoft PostsStrong ProfitsAs Tech Thrives

Microsoft Corp.'s best quarterly revenue growth in eight years, helped by a surge in sales for the Windows operating system, capped a strong earnings season for the technology industry that has made it a rare bright spot for investors this fall.
Microsoft's 23% boost in net income, reported after the 4 p.m. close of markets, lifted its shares more than 10% in after-hours trading, making America's third-largest company by market value some $30 billion more valuable. Its surprisingly strong earnings, after years of lackluster growth that some investors took as a sign of a plateau, showed that Microsoft has maintained its dominant position in technology even as hot Internet companies garner much of the public's attention.
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• Microsoft Goes Behind the Scenes In Google Fight 9/24/2007

The personal computer continues to expand its role as a workhorse in businesses and staple in the home. Microsoft's performance was driven largely by sales of the same two products that were key performers back in 1999 when it enjoyed its last growth surge: the Office software package and Windows, the foundation for most of the world's PCs.
The Redmond, Wash., company's results follow strong earnings last week from chip makers Intel Corp. and Advanced Micro Devices Inc. Those companies pointed to demand for laptop computers and growth in emerging markets such as China and India. Earlier this week, Apple Inc. posted a 67% jump in profit and a 29% increase in revenues amid rising sales of its Mac computers.
Overall, the PC industry, sometimes perceived as a mature business, grew more than 14% in the third quarter, according to research firms Gartner and IDC.
"Consumers are driving an enormous amount of growth, especially as they move to portables and higher-end desktops," says Todd Bradley, an executive vice president at Hewlett-Packard Co. in charge of the PC business. He said India and China are fueling H-P's sales as consumers and small businesses in those countries join the computer age. PC shipments in Asia increased 23.4% in the third quarter, according to Gartner.
Microsoft's revenue rose 27% from a year earlier to $13.76 billion for the quarter ended Sept. 30. Net profit rose to $4.29 billion, or 45 cents a share, from $3.48 billion, or 35 cents a share, a year ago.
Microsoft's shares rose more than 10% in after-hours trading. During regular trading yesterday on the Nasdaq Stock Market, Microsoft shares rose 74 cents to $31.99 at 4 p.m., giving it a market capitalization of $300 billion.
The company still faces a struggle against Google Inc. and other Internet stars that are reaping the biggest benefits from growth in online advertising. Microsoft's search engine remains far behind Google's in popularity.
Microsoft's online-services group posted an operating loss of $264 million in the third quarter, wider than the $102 million loss in the same period a year ago, though revenue jumped 25% in the quarter to $671 million. The loss comes in large part from investments in banks of computers, called data centers, that run Microsoft's online services.
In an effort to boost its presence in online advertising, Microsoft agreed Wednesday to invest $240 million for a 1.6% stake in the social-networking site Facebook Inc., valuing the closely held startup at $15 billion.
An even bigger long-term threat for Microsoft is the emergence of Internet services that match PC software such as the Office package, which includes programs such as Microsoft Word, PowerPoint and Excel for spreadsheets. Google and others are experimenting with ways to offer such functions free of charge, with the revenue coming from online advertising. Over time, some users might find less need to buy from Microsoft.
For now, demand is strong for Office and Windows, including Windows Vista, introduced last year, and its predecessor, Windows XP. Quarterly sales at the Windows division jumped 27% to $3.37 billion. Revenue and profit also grew at a double-digit pace in the division that sells Office.
Vista has generally underwhelmed reviewers, but many consumers end up with it when they buy new PCs that come with Vista by default. Microsoft executives said they were surprised that a majority of Windows sales came from pricier versions of XP and Vista that include features such as better photo-editing software.
The real test of Vista will come over the next year as more large businesses face the choice of whether to roll out the software broadly. Many corporate buyers remain skeptical that benefits of Vista will outweigh the costs and challenges of switching to it.
Companies like Webcor Builders, a San Mateo, Calif., commercial builder with around 700 employees, are helping to boost Microsoft and the PC makers. Gregg Davis, chief information officer of Webcor, says his company is upgrading its PCs with laptops that include new Microsoft software such as Office 2007. Webcor plans to roll out 200 new laptops in the next two months, and will complete the deployment by mid-2008.
"We're always upgrading," says Mr. Davis.
Microsoft said the revenue growth in the third quarter was its fastest since 1999, when the dot-com boom was in full swing. The growth is even more significant because Microsoft today has two and a half times the revenue it did eight years ago. "To be able to grow as fast as we did eight years ago...is a pretty momentous achievement," said Microsoft's chief financial officer, Chris Liddell, in an interview.
Microsoft's revenues got a boost from the weak dollar, which raises the value of sales overseas when converted into dollars.
One noteworthy contributor in the quarter was the Xbox 360 videogame console and the Halo 3 videogame, which together nearly doubled revenue in Microsoft's entertainment division to $1.9 billion for the quarter. The group moved into the black, posting a profit of $165 million compared with a loss in the same period of the previous year of $142 million.
Despite the strong run of tech earnings, the industry by itself can't hold up the U.S. economy, which some believe is headed for a downturn triggered by the housing slump. Business and government spending on technology accounts for just 4% to 5% of annual output in the U.S., according to Forrester Research. "Tech is a bright spot in the economy, with emphasis on the word spot," says Andy Bartels, a Forrester analyst.
But tech makes up a much bigger portion of the stock market -- some 16.6%, according to Standard & Poor's. The strong earnings at Apple, Intel and others have helped keep stock indexes near record highs even as financial institutions take big hits connected to mortgages gone bad.
--Don Clark and Pui-Wing Tam contributed to this article

From WSJ on-line
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"Black Thursday"

Shanghai Composite -- China's stock market drops almost 5% this Thursday.
I know that a lot of people have positions related to China's stock market, so i think it's an important issue to discuss the reason why it drops and the future trend of the market.

There are lots of view about the reason why it drops. Like the news of the exchange of the A share and the H share. and the new issue of the China Petroleum & Chemical Corp in the market.

I personally think that the main reason is the most simple one -- the market is just too heat!!
Too many "hot money" flow into the market, which cause the stock price are over-valued. Actually i will think that the drop is a good think for the market. It can prevent the market too heat and prevent the bubble economy.

Hope to see someone can share other view of the marekt!! ...read more...

Result of the 3rd quarter report....

Kostolany, the famous european specelator said that no one can effect the market by him/herself, only the investor's fear and untrust of the market do!!

This week, a lot of companies announced their third quarter report. As we can see,
the companies that have good performance on their report not result in the rise of the stock price. Take Amazon for example, its stock price drop 15% on the day they anounced the report. The report shows that it has almost "four times" profit than the same period last year.
But the pretty number is lower than the predict of the wall street analyists which make the stock price drops.

If we take closer look on the report result and the performance of the stock, we can easily found out that they are not highly related. The stock price depends on the mind of the investors.

What do u guys think?! ...read more...

What do think about this?

What we learn from our textbook is that we have to diversify our investment and reduce the risk. "Eggs should not be put in one basket". However, Buffet said that "You should put all your eggs in just one basket!!!" What do you guys think about this? ...read more...

Guess what? I got 100 !

" The good news, sir, is that Harris was able to sell off our losing stocks. The bad news is that Simpson here bought them from Harris."

This cartoon is not funny, cuz maybe it's my story. My ranking is 100 out of 116 today at the Virtual Stock Excange competition.... I wish I got a 100 score on my exam on monday. ㅠ_ㅠ; ...read more...

The "Most" Series..

These are not directly related to investing, but interesting articles.
(from Business week.)

The World's Most Expensive Restaurants

A new list from Zagat Survey calls London the most expensive city in the world in which to eat. But it has lots of company
By Jennifer FishbeinThe world has no shortage of big-ticket restaurants, and even if you've never set foot in one, you likely could rattle off those cities with the highest concentration of them: London, Tokyo, Paris, Vancouver—yes, Vancouver. Average per-person tabs in British Columbia's largest city might run $39, paltry compared with those in Osaka, Kobe, or Kyoto, where restaurant meals cost an average of $65, according to Zagat Survey. But the Canadian city rivals New York ($39) for the title of priciest dining capital in North America. And meals in Montreal cost an average of $1.71 more than in Los Angeles. Surprised? Click on for a look at some of the poshest eateries in the cities ranked by Zagat as the most expensive in the world to dine. All prices are per person.

America's Most Toxic Cities

The metropolitan areas with the highest number of contaminated sites per capita in the nation
By Maya RoneySource of data: Environmental Data Resources (EDR), http://www.edrnet.com/. Databases include federal, state, municipal, and tribal records of contaminated sites. Most databases updated on a quarterly or biannual basis.EDR defines site contamination as the presence of man-made chemicals or other alteration in the natural soil environment. This type of contamination typically arises from the rupture of underground storage tanks, application of pesticides, percolation of contaminated surface water to subsurface strata, leaching of wastes from landfills, or direct discharge of industrial wastes to the soil.Contaminated site totals on our list also include the following:1) Leaking storage tanks: tanks that store petroleum or other hazardous substances that can harm the environment and human health.2) Corrective action reports: large commercial sites that are identified by the Environmental Protection Agency (EPA) as requiring corrective action because of a hazardous spill or leak.The sites in these two types of EPA classifications are some of the most polluted and can typically generate dangerous health ramifications such as vapor intrusion, according to EDR.


America's Most Affordable Housing Markets 2007

The most affordable housing markets in each state, according to Coldwell Banker's 2007 Home Price Comparison Index
By Maya RoneyWhat is the difference between an average home in Beverly Hills, Calif., and a similar one in Killeen, Tex.? About $2.1 million, according to Coldwell Banker's 2007 Home Price Comparison Index (HPCI), which ranked Beverly Hills and Killeen as the least and most affordable housing markets in the U.S., respectively. The HPCI evaluates market conditions in 317 metropolitan areas by looking at homes that are approximately 2,200 square feet, with four bedrooms and 2.5 bathrooms. On average, a house like this in Beverly Hills sells for $2.2 million, while in Killeen, it goes for a just fraction of that cost, at $136,725. Take a look at our slide show to find out which are the most and least affordable markets in your state. ...read more...